Proposed MI law seeks to end property tax loophole

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BERRIEN COUNTY, Mich. -

New legislation introduced by two Berrien County state representatives looks to close a loophole that allows people to cut corners on their property taxes.

“If we don’t stop it now, it will become a huge problem,” said Bret Witkowski, the Berrien County treasurer.

The tax loophole zeros in on areas like St. Joe, Michigan, where many houses are purchased as vacation homes by people who live in other states.

“It benefits people, sadly, to try to cheat the system from a tax standpoint, but it’s not the right thing to do,” said Witkowski.

And it’s not a good thing for southwest Michigan.

Witkowski said some people who purchase second homes in the area are dodging paying the full amount they owe in property taxes.

They’re doing so by declaring a ‘homestead property tax exemption’ on their vacation home – but homeowners should only be claiming this exemption on the home they consider their permanent residence.

The loophole means less tax revenue for local schools.

“Whether it’s a rental, whether it’s a business, or whether it’s a second home, that is money that goes to the state education fund – and, or – in our case, a couple school districts get it directly – Bridgman, River Valley, and New Buffalo,” said Witkowski.

He said those cutting corners are having a serious impact.

He estimates local schools have lost nearly $500,000 just in the last six to nine months because of it.

So he took his concerns to Kim LaSata and Dave Pagel, two Michigan state representatives and Berrien County natives who have backgrounds in education.

They introduced legislation on Wednesday that would close the loophole.

In a press release, Pagel said, “Every day, this improper practice takes resources away from schools and local services.”

“We’re not trying to get people to pay extra,” said Witkowski. “We’re not trying to penalize people. We’re just asking those not to take advantage of the law and put the burden on people who are living here and doing it the right way.”

The loophole – as it stands right now – not only allows someone to pay less property tax under false pretenses, but if they get caught, they’re currently allowed to fix the problem by essentially going back in time to correct it all.

Witkowski gave an example of someone who lives full-time in Illinois but has been using the system in Berrien County.

“The state [currently says], ‘Well if you go back and correct your non-homestead in Illinois from 2013, ’14, ’15 – which is going back in time – then we’ll let you keep your one in Michigan,’” said Witkowski. “Well that’s not part of the law. That means they had a dual homestead for 2013, 2014, 2015.”

In a phone conversation Thursday afternoon, Pagel said he’s confident the legislation will make it to the governor because, he said, it’s a no-brainer.